As 2025 draws to a close, Wall Street's research departments have been busy publishing their 2026 market outlooks. The overall tone? Cautiously optimistic—with emphasis on both words.

The major firms see continued equity gains ahead, driven largely by the artificial intelligence investment supercycle and resilient economic growth. But they're also flagging elevated valuations, policy uncertainty, and potential volatility as reasons for careful portfolio construction.

Here's what the biggest names in finance are telling their clients about the year ahead.

J.P. Morgan: Double-Digit Gains, But Watch the Labor Market

J.P. Morgan enters 2026 with a bullish stance on global equities, forecasting double-digit gains for both developed and emerging markets. The firm's analysts see earnings growth of 13% or more next year, with the AI supercycle driving above-trend growth for "at least the next two years."

However, J.P. Morgan isn't dismissing risks. The firm assigns a 35% probability to a U.S. and global recession in 2026—not their base case, but high enough to warrant attention. The labor market, which has shown signs of cooling throughout 2025, remains the key variable to watch.

"The AI supercycle is driving above-trend earnings growth of 13-15% for at least the next two years. This secular tailwind provides meaningful support even as cyclical factors introduce uncertainty."

— J.P. Morgan Global Research

BlackRock: Overweight U.S., Broaden the AI Trade

The world's largest asset manager remains overweight U.S. equities heading into 2026, but with an important caveat: it's time to look beyond the obvious AI winners.

BlackRock's Investment Institute sees AI capital spending continuing to support growth, with investment's contribution to U.S. GDP running at three times its historical average. This allows the economy to maintain momentum even as the labor market gradually cools.

The firm is specifically highlighting opportunities in companies building AI infrastructure—data centers, power generation, and semiconductor equipment—rather than just the chip designers and cloud platforms that led the 2024-2025 rally. They're also constructive on fixed income, expecting Fed rate cuts to support bond prices through at least the first half of the year.

Goldman Sachs: Hot Valuations Meet Hot Growth

Goldman Sachs frames 2026 as a tension between strong fundamentals and stretched valuations. Their analysts see sturdy global growth continuing, supported by non-recessionary Fed rate cuts—a combination that historically supports equity markets.

The catch? Valuations are elevated by almost any historical measure, and Goldman warns that "hot valuations may increase volatility" even in a fundamentally supportive environment. Their outlook suggests investors should expect returns but be prepared for larger and more frequent pullbacks than the relatively smooth 2025 experienced after its early-year volatility.

Morgan Stanley: Equities Over Bonds, U.S. Over Everyone

Morgan Stanley's 2026 call is straightforward: favor equities over credit and government bonds, with a strong preference for U.S. assets. The firm sees American exceptionalism continuing as the domestic economy benefits disproportionately from AI investment and reshoring trends.

That said, Morgan Stanley identifies a potential opportunity in fixed income during the first half of 2026. As central banks pivot from inflation control to what the firm calls "equilibrium management," government bonds could rally. Their recommendation: consider overweighting bonds tactically in H1, then reassess as rate cut cycles mature.

Charles Schwab: Expect Instability, but Earnings Win

Schwab's outlook acknowledges the unusual macro environment heading into 2026. Policy crosscurrents—including tariff uncertainty, tax policy implementation, and Fed independence concerns—combine with a softening labor market to create what the firm calls an "unstable" backdrop.

Despite this, Schwab expects stocks to "churn higher" thanks to a firmer earnings picture. The firm is particularly constructive on international developed markets, forecasting that non-U.S. stocks could outperform as earnings and economic growth accelerate in Europe and Japan.

Vanguard: AI Exuberance Meets Reality

Vanguard, known for its measured approach, projects U.S. economic growth of about 2.25% in 2026—a modest acceleration from 2025, supported by AI investment and fiscal stimulus from the One Big Beautiful Bill Act.

But the firm also sounds a note of caution on tech valuations. While acknowledging that tech stocks could maintain momentum, Vanguard warns that "risks are growing amid AI exuberance" and sees "more compelling investment opportunities emerging" in other sectors and asset classes. Translation: don't chase the winners of the past two years expecting the same results.

Key Themes Across Forecasts

Reading across these outlooks, several consistent themes emerge:

  • AI remains the dominant narrative – Every major firm sees the artificial intelligence investment cycle as a multi-year tailwind, though opinions differ on which stocks offer the best entry points at current valuations.
  • Valuations matter more now – After two years of strong gains, elevated prices leave less room for error. Multiple firms warn of increased volatility even in positive-return scenarios.
  • Fixed income is back on the table – With rate cuts underway and more expected, bonds offer both income and potential capital appreciation for the first time in years.
  • U.S. remains the default preference – While some firms see international opportunities, none are recommending underweighting American equities.
  • Recession risk is contained but real – Probability estimates range from 25% to 35%, high enough that defensive positioning and diversification remain prudent.

The Bottom Line for Individual Investors

Wall Street's consensus for 2026 is constructive but not euphoric. Stocks can rise, but probably not as much or as smoothly as they did in 2025. Bonds deserve a place in portfolios again. And the AI trade may need to broaden beyond the obvious names to continue working.

As always, these forecasts are educated guesses, not guarantees. But understanding how the world's largest investors are thinking about the year ahead can help inform—if not dictate—your own portfolio decisions.